77% of defined contribution pension pots that matured last year held less than £50,000 in assets – a total of 565,903 pension pots, shows new research from Bowmore Financial Planning.
43% (319,802) of all defined contribution pension pots that matured last year held less than £10,000 in assets, compared to only 5% (35,654) which held more than £250,000.
Bowmore says that the low value of the majority of these pension pots shows that the majority of savers are still not putting enough money aside for retirement.
Data from the Pensions and Lifetime Savings Association shows the average level of annual income required for a single person living a comfortable retirement is £43,000. The level of annual income required for couples is £59,000.**
Mark Incledon, Chief Executive Officer at Bowmore Asset Management, says: “Inflation has pushed up the cost of retirement rendering even more pension pots inadequate.”
“One way that investors can help themselves is by startng their pension savings early. That will help them take advantage of long-term compounding of their investments which will help grow their pension pots into something much more substantial.”
“Whilst saving does at times require financial discipline, the greater the efforts you make during the earlier stages of your life, the greater the rewards will be in retirement.”
Bowmore says that the low size of pension pots is also partly caused by savers deferring investments into their pension during the cost-of-living crisis.
Adds Mark Incledon: “The introduction of auto enrolment has helped but for most employees their workplace pension is not going to provide enough to fund a comfortable retirement.”
The key to building wealth is to set the discipline and allocate a sensible amount of your income from an early age and save through a tax subsidy vehicle (pension). The power of compounding returns over the longer term will do the rest and improve your standard of living in retirement.
